And still the woes of charity banking persist
Julian Lomas
Over the last couple of years we have written about the issues charities have experienced setting up and operating bank accounts and attempts made by regulators and industry bodies at alleviate these problems.
A recent wave of further reports of problems suggests that things really aren’t getting any better. For example, Charity Banking Challenges 2024, published by the Charity Finance Group found that 92% of charity respondent had experienced at least one banking difficulty in the last 2 years and concludes there is “a clear disconnect between the service that retail banks think they provide to their charity account holders, and the level of service they receive.” 77% cited difficulties changing signatories on bank mandates and 40% reported being subjected to checks that should not (or cannot) apply to voluntary organisations. Charity regulators across the UK, together with the NCVO, Civil Society group, Charity Finance Group and others have called on the Financial Conduct Authority to do something about these issues, as yet with no substantive action in response.
The press continues to highlight horror stories of charities having banking service withdrawn, charities not being able to meet legal and regulatory requirements, staff and trustees borrowing money to enable their charity to pay staff after bank accounts have been frozen and even of charities being forced to close.
The Muslim Charities Forum with support from the University of Aberdeen published The Landscape of Debanking within Muslim Charities and its Impact on Charitable Activities in early 2025 which finds that “counter-terrorism policies and global risk frameworks disproportionately affect Muslim-led charities, and there is a clear link between these frameworks and the financial difficulties these organisations face.” The report concludes that there is structural Islamophobia in the bank sector.
This is all despite the Charity Commission and its sister regulators in Scotland and Northern Ireland, with the support of HMRC, writing open letters to the CEOs of UK Banks calling for them to make banking for charities more user friendly, guidance from the Charity Commission to help charities navigate banking issues and avoid difficulties (while continuing to press for more action) and a Voluntary Organisation Banking Guide issued by UK Finance (which seems to make responsibility for addressing these issues solely the responsibility of charities).
It’s exasperating, but until the banks and their regulators get their collective act together, we continue to recommend that charities should:
Shop around to find a bank that gives you confidence and consider a bank that specialises in banking for charities. They at least understand charities and the processes involved and want your business because, in some cases, they only offer banking services for charities. That said, we have clients who have had poor experiences with even these banks and most have more limited functionality than high street banks (e.g. not offering integration with accounting software).
Make sure to find out early what your preferred bank needs from you to open an account, particularly what ID and other documentation they need for Trustees. If you feel like the person you spoke to isn’t confident about what is needed, call again and speak to someone else. In any case, asking two, three or four times is advisable because they often give different answers each time. Make sure they speak to their central charities team to get chapter and verse. This way there’s a reasonable chance you can have all the required documents ready when you need them. if you have a number of Trustees who are customers of the same bank, gong with that bank can sometimes help smooth things along.
If your preferred bank is likely to take a long time, consider opening an account with a specialist bank for charities (even if it doesn’t given you everything you want) so you at least have an account. Then you have more time to open the account you really want.
Start with a small number of Trustees and appoint more after you have opened your bank account.
Make sure that you read correspondence from you bank carefully and respond promptly and accurately to their requests for periodic updates. If any trustees won’t provide the required documentation or information, consider removing them as trustees (providing this information is a legal requirement on them after all).
In the end, most of the troubles we have seen stem from incompetence, ignorance or lack of interest from bank staff and there’s not a lot you can do to prepare for that, but at least you can try!
To find out more about how we can help with setting up and incorporating charities or charity governance more generally, please contact us at julian@almondtreeconsulting.co.uk to arrange free initial telephone discussion.